Project complete: Upfront payment to connect to DH
Date: 23/08/2023Do people want to connect? How can DH be developed with a good business and lower risks? These are key questions when developing DH in a new area. A new report shares experiences from converting areas from heating with natural gas to district heating in Denmark.
Before the energy crisis, Danish DH companies struggled to get potential customers to abandon their natural gas boilers and connect to DH instead. Interest was moderate, which made it difficult to reach a sufficiently high connection rate for project approval. As a result, Danish DH companies worked to develop ways to increase the connection rate to DH. The challenges changed as the energy crisis set in, and solutions were adapted to handle this.
The report contains a thematic summary based on collected experiences from Danish DH companies and DH experts and a description of the data, method, and results from the economic analyses.
Among the main findings are:
- The connection rate is of great importance to the economy, and the analyses illustrate the magnitude of the effect at 70% connection in the baseline scenario, at 10% additional connection after 15 years, and at the mandatory connection of 95% of potential consumers. A discount on the connection rate is a powerful tool, but other efforts can help increase the connection
- Interest rates and investment costs are of great importance to the economy, and financing and risks must be considered carefully and balanced against higher connection rates achieved through discounts on the upfront payment. In particular, when interest rates are increasing.
- The strengths of a common heat supply. The total cost is lower if everyone connects to district This results in lower heating costs for consumers. Also, the investment costs are lower when DH is established in the whole area in one go.
- The assessment period is essential, and the effect of using an assessment period different than the typical Danish choice of 20 years has been studied.
- Different loan types have different risks. Further, the significance of whether the consumer or the district heating company takes out the loans has been investigated.
The report describes the results of a research project funded by the Danish District Heating Association's research and development funds. The report is available in a Danish and an international version (in English).
